When Santa Claus visits crisis-hit Europe this Christmas, his sack may not be quite so bulging with presents.

Rising prices, muted wages growth and swingeing austerity measures have squeezed disposable incomes across the region. And fears a debt crisis could blow the euro apart and bring down banks have dashed hopes of an improvement any time soon.

Consumer confidence in the 27-nation European Union (EU) sunk to its lowest level this year in October.

I am definitely spending less this year, said Ben Bauer, 37, a machine operator at a hospital in Berlin, Germany.

You can see the effects of the euro crisis everywhere, especially where I work, since we are earning less. If we are earning less, how are we supposed to spend more?

And Germany is one of the better performing EU countries.

Retail consultants Conlumino predict retail sales in the 17-bloc euro zone will rise just 0.8 percent year-on-year in December, thanks largely to increases in Germany and France.

Stripping out the impact of inflation, the situation is much worse. Retail volumes -- the number of goods shoppers buy -- are tipped to fall 2.3 percent. That would be the biggest decline since at least the launch of the euro in 1999 and includes drops of 4.3 percent in Spain, 5.2 percent in Portugal and 8 percent in Greece -- three of the worst hit countries.

Although people will continue to celebrate, they will do so with one eye kept firmly on their spending. said Conlumino lead consultant Simon Chinn.

The picture is no brighter outside the euro zone. In Britain, which is also seeing big cuts in government spending, consultants Deloitte expect no growth in sales this Christmas.

We will definitely be counting the pennies, said Audrey Kellett, a pensioner shopping for boots in Milton Keynes, England. I do not know about all that (the euro crisis) ... But no one is saying any good is going to come of it, are they?

POOR AUNTIE ETHEL

Just as the pain is not being shared out equally among Europeans, so retailers face different fortunes as shoppers seem determined to ringfence at least some areas of Christmas spending, like presents for their children and good food.

Maybe this year Great Aunt Ethel won't get a present. But the kids definitely will, said Rob McWilliam, finance director at Asda, Britain's second-biggest supermarket chain.

That should be good news for toy retailers, though worrying for those selling gift sets and accessories.

I will buy as many presents for my grand children as in previous years, but nothing for me, said Marie-Louise, a pensioner shopping at the BHV department store in Paris, France.

Supermarkets think they should benefit from shoppers cutting back on expensive nights out.

We hope that maybe spending less outside, they eat more inside, said Dick Boer, head of Dutch grocer Ahold.

Chains like Asda and Morrisons have been rushing out ranges of premium own-brand foods to tempt shoppers to treat themselves more cheaply at home.

Fewer nights out, though, could take a heavy toll on restaurants, pubs and clubs, and also on sales of party dresses.

Clothing retailers are already struggling in many parts of Europe due to unseasonably warm weather and a weak start to Christmas could trigger a frenzy of discounting. Department store group Debenhams last week launched its deepest ever Christmas price cuts.

And if nights out are too expensive for many, holidays and mini-breaks are out of the question. Shares in travel firm Thomas Cook plunged on Tuesday after it said it needed to change its borrowing terms amid weak demand.

www.Christmas.com

Internet retailers should be a bright spot as time-pressed shoppers take advantage of the convenience of shopping online and, in many cases, keener prices. The growing availability this year of mobile phone shopping and click and collect services -- where customers order online and pick up goods in store to save on delivery costs -- should help as well.

I check every price with my iPhone. I do not like paying something and then discovering it was cheaper somewhere else, said Marina Tancredi, a 21-year-old student while browsing in the Rinascente department store in Milan, Italy.

Online retail industry group IMRWorld forecasts internet sales across Europe will leap 20 percent in the eight weeks before Christmas, with Britons expected to be the most click-happy, accounting for 30 percent of total online spending.

With internet retailers and supermarkets forging ahead, however, the pain will be that much greater for many specialist store groups that do not have a big presence online.

A steady stream of retail groups, from Woolworths and MFI in Britain to Arcandor in Germany and Onoff in Sweden, have been driven out of business in recent years, and analysts fear more could follow in the coming months.

Only those able to win market share will be immune and we should anticipate an increased number of casualties, said Ian Geddes, UK head of retail at Deloitte.

One ray of hope is that sluggish economic growth and heavy discounting by retailers could drive down inflation more quickly than policymakers have expected, helping boost demand in 2012.

(Additional reporting by Robert-Jan Bartunek, Victoria Bryan, Antonella Ciancio, Natalia Drozdiak, Silke Koltrowitz, Michel Rose and Dominique Vidalon; Editing by Elaine Hardcastle)